Guide To Home Financing : No Deposit Home Loans
Loads of people buy their own houses, but all the stuff included with this process may seem a bit daunting. There’s a lot involved and not knowing about the processes could cost you time and money. But don’t be put off the idea of a home finance, because once you understand what to do, you’ll feel much better about it.
Luckily for you, this is a guide to home financing – it will help you to know what you need and also how everything works.
What is deposit?
Typically, you’ll be required to pay a deposit of 10% to 20% of the original purchase price. Since this payment can’t be refunded if you break the negotiated, you should think carefully before you break a contract. Banks will often finance up to 90% of the property’s price, so you’ll need at least 10% in cash to pay for the deposit.
A No Deposit Home Loan
If you have equity in a current property this can be used to draw down cash to front a deposit on a new purchase. The current property can then be cross collateralized with the new property to offer security for the deposit and the rest of the purchase price on the new property, all rolled into one loan. In this way you put no cash into the purchase and the finance is in effect 100% of the new property value. This is often called a No Deposit Home Loan.
Before entering into a No Deposit Home Loan calculate how much can you afford to borrow?
One of the first things you should know is how much you can afford to borrow which is why people often choose fixed rate loans. A good way to find out how much you would need to pay monthly is to see what you already pay. You should add up things such as the amount you pay for bills, rent, car costs and any other financing instalments you currently have.
Once you’ve calculated what you currently pay and what you have left over, you should have a rough idea of what you will be able to pay for a mortgage. Make sure that you won’t need to stretch yourself each time you make a payment, because it can be stressful and there’s also a chance that you won’t have enough.
Fixed or variable interest rates?
You may have heard about two of the most popular types of interest rates on offer; these are fixed interest rates and variable interest rates.
With a fixed rate, you’re payments will stay the same until the term is over. This can be good, because if the market rates go up you’ll still be paying the same amount, rather than a higher one. However, if it drops, then you could be losing out on a substantial amount.
With a variable rate, the amount of money that you need to pay changes with the market rates, which can offer you a low payment or a high payment. Apparently, those who go with a variable rate generally end up spending less money, but since the price can change in any way, you can’t be sure.